Correlation Between Optica Rare and Global X

Can any of the company-specific risk be diversified away by investing in both Optica Rare and Global X at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Optica Rare and Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Optica Rare Earths and Global X Gold, you can compare the effects of market volatilities on Optica Rare and Global X and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Optica Rare with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Optica Rare and Global X.

Diversification Opportunities for Optica Rare and Global X

0.69

Correlation Coefficient

Optica Rare  Global X

Poor diversification

The 3 months correlation between Optica and Global is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Optica Rare Earths and Global X Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Gold and Optica Rare is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Optica Rare Earths are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Gold has no effect on the direction of Optica Rare i.e., Optica Rare and Global X go up and down completely randomly.

Pair Corralation between Optica Rare and Global X

Given the investment horizon of 90 days Optica Rare Earths is expected to generate 0.9 times more return on investment than Global X. However, Optica Rare Earths is 1.12 times less risky than Global X. It trades about 0.11 of its potential returns per unit of risk. Global X Gold is currently generating about 0.07 per unit of risk. If you would invest  1,614  in Optica Rare Earths on August 31, 2024 and sell it today you would earn a total of  212.00  from holding Optica Rare Earths or generate 13.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Optica Rare Earths  vs.  Global X Gold

Optica Rare Earths

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Optica Rare Earths are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Optica Rare unveiled solid returns over the last few months and may actually be approaching a breakup point.

Global X Gold

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Gold are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Optica Rare and Global X

The main advantage of trading using opposite Optica Rare and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Optica Rare position performs unexpectedly, Global X can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Global X will offset losses from the drop in Global X's long position.

The idea behind Optica Rare Earths and Global X Gold pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.